As Congress argues over limits on executive pay, the New York Times reports that the chief executive of Washington Mutual, who was on the job just 17 days, is eligible for $19.1 million in compensation.Congress is proposing legislation to limit salaries of corporate executives. Here's why that is nonsense:
For short-time CEO Alan H. Fishman -- named to run the failing bank less than three weeks ago -- that would work out to $1.12 million per day (assuming he worked weekends). If he worked eight-hour days, it works out to $140,000 per hour.Here's the kicker: Fishman didn't even broker the deal to find a buyer when WaMu failed and was seized by the government; the federal government reportedly arranged the purchase by JPMorgan Chase & Co., and closed the deal while Fishman was in midair, flying from New York to Seattle.
Congress is insisting that senior managers will no longer be paid high salaries. Well, most senior managers were not paid high salaries. They were given stock options. So, they ran up the value of the stock options by using corporate money to buy shares of stock in the open market. Instead of developing new, creative ways of serving the consumer, they did what any self-respecting, self-interested official would do. They saw their opportunities and they took them.
They have now gone away, with tens of millions of dollars or hundreds of millions of dollars in their various financial accounts. This is why it is so important the government intervene to bail out the financial system. If the government did not do this, the former heads of these corporations, who took their money and left, might lose a lot of money. They don't want to lose money. So, Congress will intervene to make certain that they don't lose any money. Congress will do this in the name of the People.
This is called locking the barn door after the horses have escaped. The horses left behind a massive pile of droppings. Congress is going to use taxpayers' money to clean out the Augean stables. Meanwhile, the guys who got rich are gone, and the guys who replaced them will find it more difficult to get rich. But they will find ways to do this eventually. Their lawyers will find ways. Then, once again, Congress will be facing the need to bail out the financial markets.